The old saying is true, aim at nothing and you’ll hit it every time. But, you’ll also come up with nothing. Planning for success may sound harder, but it’s really not. A business plan is also not as hard as it sounds, even if you don’t have a business background.
What are the benefits of a business plan?
- clarify your thoughts about the essential elements of a successful business
- better communicate your vision to employees and others
- secure financing from lenders and investors
- identify strengths and weakness of your business
- identify opportunities for your business and threats to your business
- develop realistic financial forecasts.
Entrepreneur.com says, “A business plan is a written description of your business’s future, a document that tells what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of a plan.”
They even give you a step-by-step approach that can lead you to creating a sound business plan that will benefit you and your business (the link to the article is below). How do you create a business plan? The first step is determining who you are writing your business plan for? Is it a guide for yourself? Is it investors or lenders? Is it for suppliers or new hires? Once you are clear on your audience, you prepared to start your business plan work.
How to Create Your Business Plan
The U.S. Small Business Administration recommends the following elements for a business plan:
- Executive summary – a snapshot of your business.
- Company description – describes what you do.
- Market analysis – research on your industry, market, and competitors.Organization and management – your business and management structure.
- Service or product – the products or services you’re offering.
- Marketing and sales – how you’ll market your business and your sales strategy.
- Funding request – how much money you’ll need for next 3 to 5 years.
- Financial projections – supply information like balance sheets.
- Appendix- an optional section that includes résumés and permits.
According to Peter Smyth of BusinessStudent.com, these are the seven essential elements of a business plan:
- Executive Summary
- Information About Your Business
- Industry Analysis
- Marketing and Sales
- Operational Plan
You can see some overlap between these two ways to construct a business plan. Let’s walk through each of these elements.
Introduction – In your introduction, give a short overview of your business with the goals that you intend to achieve. This is the penthouse view of your business and your chance to give a concise summary of the highlights of the entire business plan. The other elements of your business plan give the ground level view. According to morebusiness.com, your introduction should answer these questions:
“Why this business?”
“Why should I run it?”
“Who’s going to buy?”
“What’s the buying and selling process look like?”
“How will my business be different than the competitor’s?”
Executive Summary – In the executive summary, you give a concise introduction to the other parts of your business plan. This is the penthouse view of the entire plan; the sections that follow are the ground level view, room by room. Since it is a summary statement of the other elements, do this last.
Investopedia recommends including the following information in your executive summary:
- your business’s name and location
- a one-sentence summary of your business’s value proposition: what separates you from the competition?
- an overview of the problem that your business will solve
- a brief explanation of how your product or service solves that problem
- an honest acknowledgment of existing competitors and a short description of your business’s competitive advantages
- a description of your ideal customer
- proof that there is a market for your product or service
- a summary of the management team you’ve assembled and how their experience will drive your company’s success
- a brief description of the development stage your business is currently in
summary financial data on sales, gross margin and profits for the next three years that are realistic, accurate and compelling
- how much money you’re requesting and, for investors, what percentage of ownership you’re offering in exchange for their backing
- major goals your business has achieved so far – and seeks to achieve in the near future
Obviously, if you’re a solopreneur who isn’t seeking investors or financing, some of the above is not necessary for your business plan. Plus, some business plans include some of the information above in the next section of the plan.
Information About Your Business – In your business description, start with some basic information about your business that you haven’t already given in your executive summary.
Describe the kind of business you are doing, whether you’re an internet marketer, affiliate marketer, a retailer, wholesaler, or service business. You’ll want to include your business structure, explaining that your business is a sole proprietorship, partnership, or corporation.
Give a brief history of your business, the mission statement, and a short description of your industry including current business outlook and future possibilities. Offer pertinent information about your products and services, and any competitive edge that you bring to the marketplace.
Industry Analysis – This is where you describe your competitive environment. If you are seeking investors or other financing, those you are soliciting will want to know that you have a good understanding of your industry and your place in it.
What are the major characteristics of your industry and who are your major competitors? How will you compete with them? What is your competitive advantage? Is your business cyclical or seasonal? How do market conditions affect your business? Are there trends or opportunities that you intend to exploit? What will it take for you to be profitable? What are the potential risks for your business?
Marketing and Sales – how will your promote your business and create sales? First, describe your target market – how are you trying to reach? What are the demographics and psychographics for your target market? This section comes down to the 5 P’s of marketing.
Product – what product or service do you intend to sell? How do your products and services differ from those offered by your competitor’s? What benefits do your products and services offer to your customers?
Price – what are your pricing strategies, and how will they enable you to create sales from your target audience? How will your pricing provide an attractive profit margin?
Place – where will you be selling your products and services? From your website? From an affiliate marketing site? From a major retailer like eBay or Amazon? Locally?
Promotion – how will you promote your products? Through paid advertising? Social media? Banner ads? Direct mail? What will it cost to promote your products?
People – Will you have salespeople? How will you handle customer service? Is your business fully automated? Who handles the automation and any customer engagement beyond the automated responses?
Operational Plan – in this section, you describe the physical elements of your business – where it is located, the facilities, and the equipment. This can include inventory requirements, suppliers information, a description of your manufacturing process (if this is a part of your business). Depending on the complexity of your business, this can be a very detailed overview.
Here is a great resource for completing this section of your business plan: https://www.thebalance.com/operating-section-of-business-plan-2947031
Financials – This is the place for your business’ financial statements. The essential statements of this section of your business plan include a Profit and Loss statement, a Balance Sheet, a Cash Flow Statement, a Sales Forecast, and a Personnel Plan. Your Financials section should include a realistic statement of three-year and five-year projections.
The following link leads you to a page with several links to articles that cover different aspects of a business plan:
The following link leads to an article titled “How To Write A Business Plan.”
The U.S. government’s Small Business Administration also offers help in creating a business plan. The SBA says, “A business plan is an essential roadmap for business success. This living document generally projects 3-5 years ahead and outlines the route a company intends to take to grow revenues.”
I agree, and the help that they offer can be found here:
As I was told long ago, plan your work and work your plan. A good business plan can be the roadmap to success that you and your business need right now.
I welcome your comments and questions, and your likes and shares.